Build a Short Synthetic Future Strategy

What is a short synthetic future?

BearishNearly Unlimited ProfitUnlimited Loss

This strategy recreates the risk profile of a short stock position by selling an at-the-money call and buying an at-the-money put. It is usually established as a very small credit or debit.

Remember that because this strategy has a short call, it has assignment risk.

AProfitLossStock Price
  • Buy a put at strike A
  • Sell a call at strike A